london 1 february 2011 - bp€¦ · −growth project portfolio + focussed base = potential for...

BP 2010 results and investor updateLondon1 February 2011

2

Bob DudleyGroup Chief Executive

3

Cautionary statementForward looking statements - cautionary statementThis presentation and the associated slides and discussion contain forward looking statements, particularly those regarding energy demand and sources of supply; possible short term impact on costs and volumes from various actions to grow value; production growth and future production; refining margins; the petrochemicals environment; refinery turnaround activity and costs; cash costs and capital expenditure; disposals, including strategy and proceeds from disposals; completion of acquisitions; effective tax rate; maintenance of a cash liquidity buffer; reduction in the gearing ratio; payment of dividends; investments in safety and operational risk; increase in turnaround activity and impact on production; embedding of the operating management system; focus on competency capability and safety culture; actions of the Safety and Operational Risk organisation; the expected timing of the transition of control of the Gulf of Mexico response operations from the GC-IMT to the BP Gulf Coast Restoration Organization; internal organisational changes and advancing learning from the Gulf of Mexico (GoM) incident; the magnitude and timing of costs relating to the GoM oil spill; the magnitude of BP's ultimate exposure relating to the oil spill and potential mitigation by other parties; payments to the oil spill trust fund and return of any excess cash from the fund; availability of cash when payments to the fund cease; timing of investigations and litigation proceedings relating to the oil spill; restarting GoM activity; GoM production; start-up of projects and their contribution to production; depreciation, depletion and amortization; underlying average quarterly charge from other businesses and corporate; future exploration activity and spend; future upstream developments and ramp up of activities in Iraq; growth in TNK-BP, including investment and production; upstream strategy (including focus on safety improvements and operational risk reduction; relationships with large resource holders and National Oil Companies; exploration investment; shifting emphasis from volume to long-term value growth; investments in technology and capability); improvements in refining efficiency; move to new refining marker margin; refinery divestments; repositioning of US Fuels Value Chains (FVC) (including divesting Southern West Coast FVC and retaining Northern West Coast FVC) and halving US refining capacity; improvements in Eastern Hemisphere FVCs, including growth in margin capture and access; investment in Toledo and Whiting refineries; timing of Whiting refinery modernization project; growth in lubricants and petrochemicals; refining and marketing performance outlook, including performance improvement and growth in earnings and returns; investments in Alternative Energy; potential for biofuels as source of transport fuels; expansion of biofuels operations in Brazil; expected sanction of lignocellulosic ethanol production facility and advancing technology for biobutanol production. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will or may occur in the future. Actual results may differ from those expressed in such statements, depending on a variety of factors including the timing of bringing new fields onstream; future levels of industry product supply; demand and pricing; OPEC quota restrictions; PSA effects; operational problems; general economic conditions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; regulatory or legal actions including the types of enforcement action pursued and the nature of remedies sought; the impact on our reputation following the Gulf of Mexico oil spill; exchange rate fluctuations; development and use of new technology; the success or otherwise of partnering; the actions of competitors, trading partners, creditors, rating agencies and others; natural disasters and adverse weather conditions; changes in public expectations and other changes to business conditions; wars and acts of terrorism or sabotage; and other factors discussed in this presentation, under “Risk factors” in our Annual Report and Accounts 2009 and our 2009 Annual Report on Form 20-F, filed with the US Securities and Exchange Commission (SEC) and under “Principal risks and uncertainties” in BP's Current Report on Form 6-K filed with the SEC on 28 July 2010.

Reconciliations to GAAP - This presentation also contains financial information which is not presented in accordance with generally accepted accounting principles (GAAP). A quantitative reconciliation of this information to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found on our website at www.bp.com

Cautionary note to US investors - We use certain terms in this presentation, such as “resources” and “non-proved resources”, that the SEC’s rules prohibit us from including in our filings with the SEC. U.S. investors are urged to consider closely the disclosures in our Form 20-F, SEC File No. 1-06262. This form is available on our website at www.bp.com. You can also obtain this form from the SEC by calling 1-800-SEC-0330 or by logging on to their website at www.sec.gov.

Tables and projections in this presentation are BP projections unless otherwise stated.

February 2011

4

Agenda

Introduction Bob Dudley

2010 results Byron Grote

Safety & Operational Risk Bob Dudley

Gulf of Mexico oil spill

Exploration & Production

Refining & Marketing Iain Conn

Alternative Energy Bob Dudley

Conclusion

Q&A

5

2010: Gulf of Mexico oil spill and response

Deepwater Horizon incident• 11 lives lost

Response• Unprecedented containment, well-capping

and clean-up • Dividend suspended• $20bn Trust Fund established• $30bn divestment programme initiated• New Safety and Operational Risk

organization• Reorganization of BP’s upstream business• Introduced new performance management • Sharing and implementing learnings

6

2010: underlying performance

Strong underlying financial performance(1)

• Underlying earnings of $20.5bn and operating cash flow of $29.6bn

Business performance delivery

• 106% reserves and 470% resource replacement(2)

• Access and exploration success

− Brazil, Azerbaijan, Egypt, North Sea, Indonesia, China

• 15 projects progressed through Final Investment Decision

• Improved Production Target achieved in Iraq

• $0.9bn of underlying performance improvement in R&M(3)

Successful divestment program

• Realized values exceeded expectations

• Portfolio refocused

(1) Adjusted for the costs associated with the Gulf of Mexico oil spill, other Non-Operating Items and Fair Value Accounting Effects(2) Reserves and resource replacement, as reported on a combined basis of subsidiaries and equity accounted entities, excluding

acquisitions and divestments(3) Adjusted for non-operating items, fair value timing effects and the environment effect of refining margins, petrochemical margins,

forex and energy costs

7

Energy demand to 2030

* Includes biofuelsSource: BP Energy Outlook 2030

Bill

ion

toe

0

3

6

9

12

15

18

1870 1910 1950 1990 2030

Renewables* Nuclear Hydro Gas Oil Coal

8

The challenge of meeting growing demand

(1) Today’s borders* Includes biofuelsSource: BP Energy Outlook 2030

Bill

ion

toe

Renewables* NuclearHydro Gas OilCoal

US

0

1

2

3

4

1990 2010 2030

EU(1)

0

1

2

3

4

1990 2010 2030

China

0

1

2

3

4

1990 2010 2030

9

Moving BP forward Our strategic agendaPutting Safety & Operational Risk management at the heart of the company• A long term integrated approach

− How we manage risk− How we operate− How we partner with governments and contractors− How we reward our people

Re-building trust• Meeting our commitments to the US• Sharing and implementing lessons globally

Value growth• Dividend resumed• Active portfolio management: divesting/acquiring for value• Investing for upstream value

− Growth project portfolio + focussed base = potential for stronger growth− Increasing investment in exploration− New forms of partnerships with resource holders

• Reshaping downstream− More focussed portfolio: improved returns and growth

10

The BP team

Mike DalyExecutive Vice President,Exploration

Bernard LooneyExecutive Vice President, Developments

Bob FryarExecutive Vice President, Production

Andy HopwoodExecutive Vice President, Strategy & Integration

Mark BlyExecutive Vice President, Safety & Operational Risk


David PeattieSenior Vice President, Russia

Lamar McKayPresident & Chairman BP America & GCRO

Rupert BondyGroup General Counsel

2011 BP investor roadshow team

Brian GilvaryDeputy Group CFO & Head of Finance

Iain ConnChief Executive Refining & Marketing

Byron GroteChief Financial Officer

Steve WestwellExecutive Vice President, Group Strategy & Integration

Peter HenshawGroup Head of Communications

Fergus MacLeodHead of Investor Relations

11

Byron GroteChief Financial Officer

12

Trading environmentLiquids realization

0

30

60

90

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q2009 2010

Refining indicator margin

0

2

4

6

8

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q2009 2010

Gas realization

0

4

8

12

16

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q2009 2010

$/m

cf

$/bb

l$/

bbl

Change vs 2009

Average realizations 4Q Year

Liquids $/bbl 16% 30%

Natural gas $/mcf 8% 22%

Total hydrocarbons $/boe 10% 25%

Refining indicator margin $/bbl 211% 11%

13

Financial resultsAll earnings figures are adjusted for the costs associated with the Gulf of Mexico oil spill, other non-operating items and fair value accounting effects.

* 4Q10 excludes post-tax cash outflows of $(5.4)bn related to Gulf of Mexico oil spill

Replacement cost profit before interest and tax 4Q10 vs 4Q09 ($bn)

0

1

2

3

4

5

6

7

8

4Q09 E&P R&M OB&C Co.adj. 4Q10

5.25.9Organic capital expenditure ($bn)

14.0

2.6

7.3

23.4

4.4

(1.5)

(0.4)

6.3

(0.5)

(0.3)

0.0

7.1

4Q09

(2.2)Tax

7.0Replacement cost profit before interest and tax

0.1Consolidation adjustment

(0.4)Interest & minority interest

5.2Cash from operations ($bn)*

-Dividend paid ($bn)

7.0Dividend per share ($c)

0.7Refining & Marketing

6.7Exploration & Production

23.2Earnings per share ($c)

4.4Replacement cost profit

(0.5)Other businesses & corporate

4Q10$bn

14

Gulf of Mexico oil spill costs and provisions(pre-tax, pre partner recovery)

5.4

23.3

(3.4)

(2.0)

1.0

27.7

1.0

4Q10

10.1

27.7

(7.1)

(3.0)

7.7

30.1

7.7

3Q10

17.72.1• Cash payments

(5.0)– Payments into Trust Fund

(12.7)(2.1)– Other related payments in the period

30.1– Carried forward

40.9

FY10

32.2– Charge/ (credit) to income statement

• Balance sheet *– Brought forward

32.2– Charge for the period

• Income statement

2Q10$bn

* Balance sheet amount includes all provisions, other payables and the reimbursement asset balances related to the Gulf of Mexico oil spill

15

Exploration & Production

• Stronger environment

• Lower depreciation

• Loss in gas marketing and trading

• Reported production 9% lower –adjusting for PSA entitlement effects and A&D, production 6% lower

− Higher turnaround activity than 4Q09

− Continued impact of the Gulf of Mexico drilling moratorium

− Absence of 40mboed benefit in 4Q09 from make-up of prior-period underlift

0

2

4

6

8

10

4Q09 1Q10 2Q10 3Q10 4Q100

10

20

30

40

50

60

Average hydrocarbon realizations ($/boe)

US Non-US TotalTNK-BP

Average hydrocarbon realizations ($/boe)

$bn

Replacement cost profit before interest and taxAdjusted for non-operating items and fair value accounting effects

16

Refining & Marketing

Replacement cost profit before interest and taxAdjusted for non-operating items and fair value accounting effects

(1.0)

(0.5)

0

0.5

1.0

1.5

2.0

4Q09 1Q10 2Q10 3Q10 4Q10

0

2.0

4.0

6.0

8.0

10.0

12.0

US Non-US

Refining indicator margin ($/bbl)

Total

$bn

Refining indicator m

argin ($/bbl)

• Stronger refining margins

• Strong operational performance in fuels value chains

• Continued momentum in international businesses

• Further cost efficiencies

• Loss in supply and trading

17

Other businesses & corporate

• Adverse foreign exchange effects

Adjusted for non-operating items and fair value accounting effectsReplacement cost profit before interest and tax

(0.8)

(0.6)

(0.4)

(0.2)

0

0.2

4Q09 1Q10 2Q10 3Q10 4Q10

$bn

18

Sources & uses of cash

• Disposal proceeds of $6.2 billion for deals closed in 4Q

• Additional $6.2 billion of cash deposits held at year end for disposals expected to complete in subsequent periods, which is reported as short-term debt.

• Cash at 31 December is $18.6 billion

Dividends

Dividends

Capex

CapexOperations Operations

Disposals

DisposalsOther Gulf of Mexico

oil spill payments

Trust Fund

0

5

10

15

20

25

30

35

40

45

Sources Uses Sources Uses

2009 2010

$bn

19

Net debt ratio

Net debt ratio = net debt / (net debt + equity)Net debt includes the fair value of associated derivative financial instruments used to hedge finance debtCash of $6.2bn received as deposits for disposals completing after year-end is reported as short-term debt at 31 December 2010

%

0

10

20

30

40

10 to 20%

20 to 30%

2002 20112003 2004 2005 2006 2007 2008 2009 2010 2012

20

2011 guidance

32% - 34%31%Full year effective tax rate***

~ $400m~ $350mOB&C: average underlying quarterly charge

Slightly higherSlightly lowerCash costs** (year-on-year change)

~ $500m higher$11bnDD&A

$5bn$5bnPayments into Trust Fund

$13bn$17bnCash from disposals*

~ $20bn$18bnOrganic capital expenditure

2011 guidance2010

* Cash from disposals including deposits of $6.2bn received at year end 2010 relating to disposal transactions expected to complete in subsequent periods

** Excluding the effects of changes in exchange rates and fuel costs. A full definition of cash costs can be found on bp.com*** Excluding the impact of the Gulf of Mexico oil spill

21

Financial framework

• Increased investment to grow the firm

• Resumption of the quarterly dividend supported by:

− Continued success in the disposal program

− Improving business environment

balanced by:

− The need to retain significant level of financial flexibility

• Financial flexibility provided by:

− Maintenance of a significant cash liquidity buffer

− Reduction in gearing to range of 10% - 20%

• Quarterly dividend level (7 cents/share) reflects:

− Continuing obligation to the Trust Fund

− Uncertainties the company still faces

− Intention to grow over time in line with improving circumstances of firm

22


23

Safety track record

Group excluding response contributionGulf of Mexico oil spill contribution

API US benchmarkInt. Assoc. of Oil and Gas Producers benchmark

0.0

0.4

0.8

1.2

1.6

2.0

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Recordable Injury Frequency (RIF)

Loss of Primary Containment incidents

0

50

100

150

200

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q2008 2009 2010

Process Safety Related Major Incidents

02468

10121416

2007 2008 2009 2010Gulf of Mexico oil spill

Note: LOPC definition aligned with API recommended practice

24

Putting Safety and Operational Risk management at the heart of BP

Resetting the focus on safe, reliable operating activity to achieve long term value creation

Leadership priorities• Process safety and operating risk reduction• Embedding BP’s Operating Management System (OMS)

− Consistent and systematic operating rigour• Competency, capability and safety culture

Rebasing performance management and reward• Focus on priorities, foundation for long term performance

New Safety and Operational Risk organization (S&OR)• Head of S&OR is member of Executive Team • Strengthen central standards setting and auditing• Deployed into the operating line

25

Implementing lessons globally

Building on our learnings and sharing them around the world

Internal changes to strengthen BP• Centralized global wells organization• Broadening areas of expertise• Enhancing our standards and practices

Advancing technology, standards and equipment in 5 key areas• Prevention/drilling safety – the highest priority • Containment – stopping the flow• Relief wells – plan for rapid well kill• Spill response – control near the source• Crisis management – preparation and co-ordination

Engaging with industry to develop new global capability

26

Living up to our commitments and earning back trust

Gulf Coast Restoration Organization

Economic & environmental impact

• ~$5bn of claims & government payments to date

• Natural Resource Damages Assessment

− Understanding the incident’s effects

− Restoring the environment & use of natural resources

Voluntary funding

Funding includes:

• $500m Gulf of Mexico Research Initiative (GRI)

• Rig Worker Assistance Fund

• Behavioural health

• Tourism and seafood testing & marketing projects

27

Gulf of Mexico oil spill Expected milestones

Indicated dates*

Investigations

• Presidential Commission final report March 2011

• Marine Board investigation final report Spring 2011

• Chemical Safety Board report to be determined

• National Academy of Engineers final report end 2011

Department of Justice inquiry continues

Multi District Litigation trials

• OPA 90** test trials to be determined

• Limitation & Liability trial February 2012

* Dates as expected only** OPA 90 = Oil Pollution Act of 1990

28

Gulf of Mexico oil spill Financial impacts

• $20bn Trust Fund

− Claims by individuals and businesses

− Government claims

− Natural Resource Damages claims

• $41bn charge taken against income

• Partner recovery not included

• Final $1.25bn cash payment to Trust Fund in Q4 2013

29

Upstream: Exploration, Developments and Production

30

Upstream − agenda

• Focus on value growth

– Risk reduction

– New forms of relationships

– Increased investment in exploration

– Active portfolio management: divestments / acquisitions

– Build technology and capability

• 2010 delivery

• 2011 guidance

31

Divestment update

50% of Kirby Heavy Oil JV to Devon

Pakistan to United Energy Group Limited

Devon Gulf of Mexico producing assets to Marubeni

46% interest in Lukarco JV to Lukoil

Venezuela to TNK-BP

Vietnam to TNK-BP

Colombia to Ecopetrol and Talisman

60% stake in Pan American Energy JV

US Permian, Egypt Western Desert, Canada Gas to Apache

Key transactions

Divestment program success• Total headline proceeds of more than $21bn• Reserves and non-proved resources of 1.7bn boe and 3.2bn boe, with 0.4bn boe and

1.8bn boe closed in 2010• Financial impact of ~$1.5bn pre-tax underlying replacement cost profit

Financial impact BP projections at $75/bblProceeds include $1.4bn of deferred payments in 2010 and 2011 for deals closed in 2009

9

19

21

Net Book Value

Wood Mackenzie

Value

Headline Proceeds

32

Net asset value distribution:Focused portfolio with potential for growth

Source: Wood Mackenzie; Assumptions: Value as of 1/1/11; 10% nominal discount rate; $80/barrel / $6/mcf Disposed assets valued at headline proceeds; Brazil value shown as purchase priceTNK-BP and Gulf of Mexico not shown

Divested portfolio

Asia Pacific

AlaskaAngolaNorth America

Gas

AzerbaijanNorthSea

PakistanVenezuelaVietnamCanada Oil

Sands

ColombiaUS (Permian)

BrazilCanada Gas

Middle East

North Africa

PAETrinidad

33

Resources to reserves to production

50.2 bn boe

End 2010

18.1 bn boe

1.4 bn boeTotal resources: production 48 years

End 2009

18.3 bn boe

1.5 bn boeTotal resources: production 43 years

Non-proved resources

Proved reserves

Production

Discovered resource access

Field extensions and improved recovery

45.3 bn boe

Prospect inventory

Exploration discoveries

Exploration and Access

Impact of 2010 disposals

(1.8) bn boe

(0.4) bn boe

Resources and reserves on a combined basis of subsidiaries and equity-accounted entitiesEnd 2010 includes impact of acquisitions and divestments completed in 2010

34

Resource and reserve distribution

TNK-BP

Trinidad

North America Onshore

Non-proved: 50.2 bn boe

Proved: 18.1 bn boe

North Africa, Middle East,Caspian

North Sea

Gulf of Mexico

South America

2010 resource base 2010 reserves additions %

13 years

35 years

Conventional oil

Deepwater oil

Water-flood viscous and heavy oil

LNG gas

Conventional gas

Unconventional gas

Reserves and resources at end-2010 on a combined basis of subsidiaries and equity-accounted entities

35

Recent access

CanadaTerre de Grace 750km2

Brazil10 blocks, 1 producing field, 3 discoveries, 6 exploration areas

IndonesiaPapua provinceAwarded ~5,000km2 block

US shale gasEagle Ford38,000 acres

North SeaValhall deepeningUKCS 26th licensing round

ChinaSouth China SeaFarmed in to 2 blocks

AzerbaijanPSA for 1100km2 Shafag-Asiman block

US Gulf of MexicoOCS lease sale 21318 leases awarded

218 leases acquired from Devon

JordanRisha concessionGovt endorsed entry into ~7,000km2 block

Russian ArcticSouth Kara SeaStrategic alliance with Rosneft

AustraliaCeduna basin4 blocks ~ 25,000km2Angola

Kwanza/Benguela basins 4 blocks

Angola, Brazil and one block in South China Sea subject to government approval

36

Project Final Investment Decisions

• Final Investment Decisions made on 15 projects

• ~$20bn of total BP net investment

– 8 projects over $1bn BP net

– Gulf of Mexico, Egypt and North Sea $4-5bn BP net each

• ~2bn boe of BP net resources under development

new additionAngolaCLOV2012 FIDTNK-BPSuzun

TNK-BP Uvat East ExpansionTNK-BP Verkhnechonskoye FFD Ph1

2011 FIDNorth Africa In Salah Southern Fields Canada SunriseAzerbaijan Chirag Oil North Sea KinnoullNorth Sea Devenick North Sea Clair RidgeNorth Sea WoS Q204Egypt West Nile Delta Gas

under reviewGulf of Mexico Horn Mountain Phase 2Gulf of Mexico Na Kika Phase 3Gulf of Mexico Galapagos Gulf of Mexico Atlantis Phase 2Gulf of Mexico Mars BGulf of Mexico Tubular Bells

FFD - Full field development

37

2011 increased turnaround activity

• ~ 50% increase in turnaround activity

• Major investment programs to manage

safety and operational risk

• Short-term production impact with

long-term reliability benefit

2011 BP projection

Number of turnarounds

201120102009

51

3534

38

Deepwater: Gulf of Mexico

• Resource base remains unchanged

• Industry-wide production reduced in 2010

• 2011 focus on safely bringing back rig activity

• Our restart criteria will cover:− Regulatory requirements− Activity and pace− Capability − Contractor management

• 2011-2012 production impact dependent on restart timing

201320122011

Thunder Horse (1)

Thunder Horse (2)

Atlantis (1)

Atlantis (2)

Exploration / Appraisal

Resumption of rig activities including plugging and abandonment is subject to regulatory approval

Range of uncertainty

Source: BP projection, BOEMRE, Wood Mackenzie

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2006 2007 2008 2009 2010 2011

Gulf of Mexico regionBP

Production, mmboed

39

Production 2006−2011

• 2011 year of consolidation

• Increased turnaround activity and planned losses

• Key drivers of uncertainty:

– Gulf of Mexico restart

– Divestment timing

– Oil price and PSA effects

– OPEC quota restrictions

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2006 2007 2008 2009 2010 2011

Production, mmboed

2011 BP projection at $75/bbl

DivestmentsReported

40

Capital investment 2006-2011

Increasing investment in line with priorities:

• Safety and operational risk activity, including an increased number of turnarounds

• Increased exploration spend

• Resumption of activity in Gulf of Mexico

• Major Projects progression, particularly in Angola, North Sea and Egypt

• Iraq ramp up of activity

Organic capital expenditure, $bn

Organic capital expenditure above excludes the following acquisition impacts: 2006 – Rosneft; 2007 – asset exchanges with Occidental;2008 – Accounting for our transactions with Husky and Chesapeake;2009 – BG asset swap and Eagle Ford;2010 – Completed acquisitions from Devon, accounting for our transaction with Value Creation Inc.,

and for the purchase of additional interests in the Valhall and Hod fields2011 – BP projections

0

5

10

15

20

2006 2007 2008 2009 2010 2011

Developments: Global Projects Organisation

Production

Developments: Global Wells Organisation

Exploration

TNK-BPBP

Pan American Energy

41

Long term value growth

Portfolio choice

Capturing value across life cycle

Enduring presence in key basins

Deepwater Gas Giant fields

Exploration Developments Production

Relationships Basin knowledge Technology

42

Value growth in the life cycle of a basin:Azerbaijan example

FFD - Full Field DevelopmentSCP – South Caucasus PipelineBTC – Baku-Tbilisi-CeyhanResources are indicativeSource: BP internal

Explore Develop Produce

Value creation

ResourcesProven

Chirag

Azeri / BTC

Shah Deniz / SCP

Shafag-Asiman

Shah Deniz FFD

1990 1995 2000 2005 2010 2015 2020 2025 2030

43

Increasing investment in explorationN

et d

isco

vere

d vo

lum

e

Post-mergerdrill-out Portfolio rebuild The future

Net

acc

esse

d vo

lum

e

2001 2005 2010 20152002 2003 2004 2006 2007 2008 2009 2011 2012 2013 2014

Source: BP internal

Exploration accessDirect resource access

44

Future exploration focus

Azerbaijan

Existing positions

New / untested positions

Jordan

Angola

Australia

SouthChina Sea

Gulf of Mexico

Brazil

Canadian Arctic Russian Arctic

Indonesia

Libya

Egypt

45

Developments: project portfolio

Locat ion Project>1bn

BP NetInvestment

Type WI %Gross

Capacit yLocat ion Project

>1bnBP Net

InvestmentType WI %

Gross Capacit y

Alaska Liberty* 100 40 mboed Angola Block 18 West* 50 50-75 mboed

Angola Angola LNG 14 5 mtpa Kiz Satellites Phase 2 27 50-100 mboed

Block 31 PSVM* 27 150 mboed Block 31 SE* 27 under study

Clochas-Mavacola 27 100 mboed Asia Pacific Browse 17/20 12 mtpa

CLOV 17 160 mboed Sanga-Sanga CBM 38 under study

Pazflor 17 220 mboed Tangguh Expansion* 37 under study

Asia Pacific North Rankin 2 17 1,800 mmscfd Azerbaijan Shah Deniz FFD* 26 1,500 mmscfd

Azerbaijan Chirag Oil* 37 140 mboed Brazil Itaipu* 40 under study

Canada Sunrise 50 60 mboed Wahoo 25 under study

Egypt West Nile Delta Gas* 60/80 900 mmscfd Canada Pike 50 under study

Gulf of Mexico Atlantis Phase 2* 56 50 mboed Terre de Grace* 75 under study

Galapagos* 47-67 60 mboed Gulf of Mexico Freedom 22-68 100 mboed

Mars B 29 130 mboed Mad Dog Phase 2* 61 125 mboed

Na Kika Phase 3* 50 40 mboed Atlantis Phase 3* 56 under study

Tubular Bells 30 50 mboed Kaskida* 100 under study

North Africa In Amenas Compression 46 330 mmscfd Mad Dog North* 61 under study

North Sea Clair Ridge* 29 120 mboed Na Kika Phase 4* 50 under study

Devenick* 89 200 mmscfd Tiber* 62 under study

Kinnoull* 77 50 mboed Middle East Oman FFD* 80 1,000 mmscfd

Skarv* 24 165 mboed North Africa In Salah Southern Fields 33 420 mmscfd

WoS Quad 204* 36 130 mboed North Sea Culzean 16 under study

Russia (TNK-BP) Uvat East Expansion 50 145 mboed Greater Clair* 29 under study

Verkhnechonskoye FFD 34 145 mboed Russia (TNK-BP) Russkoye 50 50 mboed

Trinidad & Tobago Serrette* 100 480 mmscfd Suzun 50 120 mboed

Uvat Central Expansion 50 110 mboed

Trinidad & Tobago Juniper* 100 500 mmscfd

Pre FIDPost FID

Conventional oil

Deepwater oil

Water-flood viscous and heavy oil

Conventional gas

LNG gas

Unconventional gas

* BP OperatedFFD - Full Field Development

46

Developments: deepwater projects

Angola• Block 31 PSVM• Clochas-Mavacola• CLOV• Pazflor• Block 18 West• Kizomba Satellites Phase 2• Block 31 SE

Gulf of Mexico• Atlantis Phase 2• Galapagos• Mars B• Na Kika Phase 3• Tubular Bells• Freedom• Mad Dog Phase 2• Atlantis Phase 3• Kaskida• Mad Dog North• Na Kika Phase 4• Tiber

Brazil• Itaipu• Wahoo

47

Developments: gas projects

AzerbaijanShah Deniz Full Field Development

EgyptWest Nile Delta

Asia PacificTangguh expansion

OmanKhazzan-Makarem Full Field Development

48

Developments: new start-ups

* BP operated

AlaskaLiberty *

2011 start-ups

2012 start-ups

2013-2016 start-ups

CanadaSunrise

Gulf of MexicoGalapagos *Na Kika Phase 3 *Tubular BellsMars B Mad Dog Phase 2 *Freedom

Trinidad & TobagoSerrette *Juniper *

AngolaB31 PSVM *PazflorAngola LNG Clochas-MavacolaKizomba Satellites Phase 2B18 West *CLOV

Asia PacificNorth Rankin 2

AzerbaijanChirag Oil *

North SeaSkarv *Devenick *Kinnoull *WoS Q204 *Clair Ridge *

EgyptWND Gas *Algeria

In Salah Southern FieldsIn Amenas Compression

Russia (TNK-BP)Verkhnechonskoye FFDSuzunUvat Central ExpansionRusskoye

Middle EastOman FFD *

FFD - Full Field Development2016 production from 2011-2016 new project start-ups at $75/bbl

2016

~1000 mboed

49

2013+2011-2012

Production: Iraq

• Cost recovery starts• Rehabilitation; inspection,

maintenance, commence FEED• Water, gas, power, export

solutions

• Set up the business• Achieved Improved

Production Target (IPT)

2010

• Brownfield project underway• Deliver plateau target end

2015

Activity ramp up after Rumaila Operating Organizationestablished on 1 July 2010

2010 2011

Company positions in Iraq 1Q 2010

1st Round

2nd Round

Basra

IRAN

IRAQ

KUWAIT

GHARAF

WEST QURNA 2

WEST QURNA 1

RUMAILA

MAJNOON

HALFAYAH

ZUBAIR

BADRA

BP projections

# of jobs

J F M A M J J A S O N D 1Q 2Q 3Q 4Q

Surveillance and Facilities

Wellwork

Drilling

50

2010 production, mmboed

Ros

neft

Gaz

prom

9.0

8.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

Che

vron

Tota

l

MO

L

Hes

s

Mits

ubis

hi

Mits

ui

CO

P

ON

GC

XO

M

Sin

opec

E.O

N

Win

ters

hall

She

ll

TNK

-BP

LUK

oil

BP

BP has a unique growth-oriented positionin Russia

Source: Wood Mackenzie / BP internal

BP

51

TNK-BP

Core production areas

Project areas

Uvat

Yamal projects

Verkhnechonskoye

Nyagan

Samotlor

Orenburg

RospanRusskoye

Suzun

Novosibirsk

Tagul

Kamennoye

Moscow

52

BP is forming a global strategic alliance with Rosneft

A unique alliance unlocking future growth potential for both BP and Rosneft• International upstream collaboration• Significant share swap

Arctic exploration agreement focused on South Kara Sea

Wider Arctic protocol

Exploration offshore Sakhalin

A leading European refining partnership via

50:50 ROG JV

53

Leveraging technology to reduce risk andunderpin long term reliability and value

FieldoftheFuture®

Unconventional Oil

Unconventional Gas

Advanced Seismic

Pushing Reservoir Limits

Gulf of Mexico Paleogene

Beyond Sand Control

Inherently Reliable Facilities

Subsea Well Intervention

Effective Reservoir Access

Technologies for UO resource progression

Globalize unconventional gas development through technology

High quality and efficient reservoir imaging

Growing recovery factors across portfolio

Developing equipment and techniques for reservoir conditions

Real-time downhole sand monitoring, diagnostics and control

Managing and reducing integrity risk

Digital tools for managing operational integrity threats

Real time life-of-well integrity monitoring

New and reliable equipment for deepwater subsea systems

Safe wells informed by real-time data

Deepwater Facilities

54

Upstream value growth

• 2010

− Gulf of Mexico incident

− Strategic and operational progress

• 2011 – year of consolidation:

− Increased turnaround activity

− Uncertainty on Gulf of Mexico timing

− Increasing investment for growth

• Long-term value growth

− Portfolio focus – deepwater, gas, giant fields

− Enduring positions in best basins – relationships, resource knowledge and technology

− Functional excellence across lifecycle: exploration, developments, production

− Strong projects contribution – growing from a smaller base

55

Iain ConnChief Executive, Refining & Marketing

56

Refining & Marketing − agenda

• R&M turnaround and 2010 performance

• Strategy and portfolio

• Outlook and what you can expect

57

Refining & Marketing turnaroundThe five priorities

• Safe operations and OMS(1)

• Behaviours and core processes

• Restoring missing revenues and earnings momentum

• Business simplification

• Repositioning cost efficiency

(1) Operating Management System

58

0

1

2

3

4

5

6

2003 2004 2005 2006 2007 2008 2009 2010

0

5

10

15

20

25

30

2003 2004 2005 2006 2007 2008 2009 2010

Delivering competitive performance

Underlying net income $/bbl(3)

Rolling 4-quarter data

Underlying ROACE % (post tax)(1)

(1) BP and competitor return on average capital employed data adjusted to comparable basis(2) Competitor set comprises R&M segments of Super Majors(3) Capacity as stated in F&OI / company disclosures(4) 2010 competitor data are 3Q YTD plus average broker estimates for 4Q. 2010 competitor capital employed are last reported 2009 data.

Competitor range(2)Competitor average(2) BP R&MBP R&M

59

Performance momentum 2007–2010

GIM$/bbl

9.9 6.5 4.0

Environment adjusted for refining margins, petrochemical margins, forex and energy costs

4.4

Environ’t Performanceimprovement

3.9

2007

3.3

2008

Pre

-tax

und

erly

ing

RC

pro

fit $

bn

2.7(3.3)

2.1(1.8)

3.6

2009Performanceimprovement

BP

’s Global Indicator M

argin (GIM

)

Environ’t

0.9

4.9

2010Environ’t Performanceimprovement

0.4

60

Our portfolio and performance 2007–2010

International Businesses

Fuels Value Chains

2010 average operatingcapital employed (pre tax) $bn

24

9

14

Total Refining & Marketing

Refining

Lubricants

Global Fuels

Petrochemicals

Fuels Marketing and Supply

Convenience

Pre-tax underlying RC profit $bn

2009

(1.6)

2.1

3.1

3.6

2008

2.0

(0.7)

2.0

3.3

2007

1.2

1.2

1.5

3.9

Relative areas in pie charts based on average operating capital employed (pre tax)

2010

0.3

2.9

1.7

4.9

61

2010 performance delivery

Simplification

Restoring revenues & earnings momentum

2009 2010 2011 20122007

>$1.5bn

>$0.5bn

Up to $0.5bn

Repositioning cost efficiency

Values based on underlying pre-tax RCP pa at 2009 conditions

$0.6bn

$1.4bn

$2.8bn

$4.8bn > $2bn$0.9bn


Portfolio quality & integration

Growing margin share

62

Improving efficiencyRefining

Year BP portfolio averageYear BP portfolio average Top 3 BP refineriesTop 3 BP refineries

Sol

omon

ava

ilabi

lity

%

70

75

80

85

90

95

100

Refining cost efficiency(1)

2012

2007

2009

140 120 100130 110

2004

Refining performance

90

201009 10

(1) Based on Solomon non-energy operating expense per Effective Distillation Capacity (indexed to top three BP refineries)2010 data point is based on internal BP estimates. Solomon benchmarking data analysis available mid 2011.


(1) Corrected for major historic divestments(2) Refinery turnaround costs(3) Variable costs associated with petrochemicals and refining operations

Adjusted for energy & forex(1) Normalized for energy, forex,

TAR(2) & manufacturing variable costs(3)

BP Refining & Marketing cash cost index

TAR costs(2)

50

60

70

80

90

100

110

120

130

2004 2005 2006 2007 2008 2009 2010

63

64

Refining Marker Margin 1990–2010$/

bbl

0

2

4

6

8

10

12

14

16

18

20

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Refining Marker Margin adjusted to 2010 $

65

2010 performance progression

2010

20092008

2007

20062005

2004

0

1

2

3

4

5

6

7

8

9

10

0 4 8 12 16 20

BP's Refining Marker Margin (RMM) $/ bbl

Pre

-tax

un

der

lyin

g R

C p

rofi

t $/

bb

l

$0.9bn delivered in 2010

~$5bn recovery 2007>2009

>$2bn earnings growth by 2012

66

Net investment$b

n Total net investment

Organic capex

Depreciation

(7)

(6)

(1)

0

1

2

3

4

5

2005(1) 2006 2007 2008 2009 2010 2011(2)

(1) Includes $8.3bn proceeds for Innovene sale(2) 2011 BP projections

67

Portfolio performance 2008–2010Fuels Value Chains & International Businesses progression

Pre-tax returns - %(1)

(2)

(1)

1

2

3

4

(10)% 10% 20% 30% 40%

US FVC2008

US FVC(2)

2010

EH FVC(3)

2008

EH FVC2010

IBs2008

IBs(4)

2010P

re-t

ax u

nder

lyin

g R

C

prof

it $b

n

$10bn Size of bubble = Average operating capital employed(1) Returns are based on Pre-tax average operating capital employed(2) US Fuels Value Chains(3) Eastern Hemisphere Fuels Value Chains(4) International Businesses

68

Strategy and portfolio

Reposition US Fuels Value Chains and halve US refining capacity

• Divest Texas City refinery(1)

• Divest Southern West Coast Fuels Value Chain(1)

• Transform Whiting refinery capability

• Improve Cherry Point and Toledo refineries

• Focused marketing and logistics footprint

Growth in high quality International Businesses

• Lubricants volume / earnings growth and margin mix

• Petrochemicals expansion in Asia

• Air BP growth

Improve Eastern Hemisphere Fuels Value Chains and access market growth

• Rotterdam hydrocracker option

• Gelsenkirchen yield improvement option

• Focused marketing and logistics footprint

• Marketing margin growth

1

2

3

(1) Subject to legal and regulatory approval

69

Divest Texas City refinery

• 3rd largest US refinery, highly complex(1)

• Significant improvement in safety and operations

• $2.5bn p.a. improvement in profit(2)

• Plan to complete before end 2012(3)

• BP’s obligations will be fulfilled

0

100

200

300

400

500

600

Relative Equivalent Distillation capacity (kd/d)

Cru

de D

istil

latio

n U

nit

capa

city

(kb/

d)

(1) Source: Oil and Gas Journal 2010(2) Environment adjusted pre-tax underlying RC profit(3) Subject to legal and regulatory approval

70

Divest Southern West Coast Fuels Value Chain

Retain Northern Fuels Value Chain

• High quality modern refinery

• Feedstock flexibility and location

• Diesel/ Jet yield focus

• Good integrated margins and relative returns

Divest Southern Fuels Value Chain

• High quality refinery, high market share

• Limited feedstock flexibility

• Gasoline yield focus

• Will require investment to reposition

Seattle

Portland

Sacramento

Stockton

Vinvale

Carson

San Diego

E. Hynes Colton

Pipelines

BP refinery

BP terminal

Cherry Point refinery

Los Angeles

San Francisco

Seattle

Portland

Sacramento

Stockton

Vinvale

Carson

Colton

Los Angeles

San Francisco

Carson Refinery

Richmond

71

Whiting Refinery Modernization Project

• Major rebuild of CDU(1) to process heavy crude

• World scale 100kbd state of the art 6 drum coker

• New world scale sulphur removal and gas oil hydro-treating units

• Refinery infrastructure upgrade

• ~60% complete 2010 > commissioning 2013

(1) Crude Distillation Unit

72

Whiting Refinery Modernization ProjectSources of value

Regression line established from rolling 4Q average 1Q’02–1Q’07Based off nameplate capacity as stated in F&OI = maximum sustainable rate for a 30 day period

Inde

xed

pre

tax

unde

rlyin

g R

C p

rofit

$/

bbl o

f ca

paci

ty

Mid West Refining Marker Margin $/bbl

0

100

200

300

400

500

600

0 2 4 6 8 10 12

Mid West historical performance range

Mid West post project performance for a range of WTI – Lloydminster differentials

On-stream performance at end 2010 refining environment

73

Canadian Crude

ANS Crude

Gulf CoastCrude

ANS crude adv+$ 1-2/bbl

Cushing

Edmonton

Hardisty

ANS CrudeANS Crude

Gulf CoastCrude

Gulf CoastCrude


Canadian crude adv+$3

Canadian crude adv+$3-4/bbl-4/bbl

Canadian Crude

Cherry Point

ToledoWhiting

Cherry Point

WhitingToledo

Canadian Crude

ANS CrudeANS Crude

Gulf CoastCrude

Gulf CoastCrude


Cushing

Edmonton

Hardisty

ANS CrudeANS Crude

Gulf CoastCrude

Gulf CoastCrude


Canadian crude adv+$3

Canadian crude adv+$3-4/bbl-4/bbl

Canadian Crude

Cherry Point

ToledoWhiting

Cherry Point

WhitingToledo

Repositioned US Fuels Value Chains

TradedProductSupply

• US refining capacity halved

• Repositioned configurations

• Advantaged feedstock and flexibility

• Increased diesel manufacturing capability

• Access to advantaged logistics

• Integrated with marketing

74

Improve Eastern Hemisphere Fuels Value Chains, access market growth

Margin growth options

• Rotterdam hydrocracker

• Gelsenkirchen yield improvement

BP owned refinery

Joint BP owned refinery

Market growth

• Fuels: China, Australasia, Turkey, South Africa, Poland, Iberia

• Convenience: Rhine, Poland, Australasia, UK

75

Impact of portfolio choices – refining

Source: Oil & Gas Journal 2010

Size represents absolute scale of refining portfolio

Nelson complexity

100

150

200

250

7 8 9 10 11

Ave

rage

ref

iner

y si

ze (k

bd)

Global refining quality

Current

Post 2013

Divested00>12

Alliance MombasaCoryton ReichstettGrangemouth Salt LakeLavera Singapore Mandan Yorktown

BP divestments ’00-’10

BP divestment plans ’11-’12

Texas City

Carson

76

Lubricants – high returns, high growth

Profit growth(3)

2010

ROW

BRICsOECD

Return on sales(1)

2007

Top Quartile Midpoint(2)

Consumer Sector Companies

Median(2)

Consumer Sector Companies

2007 2008 2009 2010

(1) Pre tax basis. 2010 based on 3Q YTD(2) Based on average 2007-09 performance of 2,500+ consumer sector

companies (3) Pre-tax underlying RC profit - inland lubricants excluding aviation and

marine lubricants(4) BP estimates based on available industry data and internal analysis.

Expressed as a percentage of total automotive engine lubricants sales.

Synthetic/premium lubricants sales(4)

0%

25%

50%

Market BP

77

KEYPTA sites

Acetyls sites

PX sites

O&D

Petrochemicals – high quality, Asia growth

PTA growth• East China• Zhuhai 2 DB• Zhuhai 3• India• Taiwan• Indonesia

SECCO growth

Acetyls growth• Middle East• India• China

PET co-location• Decatur• Geel• Zhuhai

Return on sales(1)

2005 2006 2007 2008 2009 20102004

Competitor rangeBP

Competitor average

2004 2010

Profit growth(2)

Asia

US & Europe

Production MTes

Asia

US & Europe

0

4

8

12

16

2004 2010

(1) Post tax adjusted to comparable basis. 2010 based on 3Q YTD(2) Pre-tax underlying RC profit

78

Portfolio performance outlook

Pre-tax returns - %(1)

(2)

(1)

1

4

(10)% 10% 20% 30% 40%

Pre

-tax

und

erly

ing

RC

pr

ofit

$bn

3

2

International

Businesses 2013+Eas

tern

Hemisp

here

FVC(2)

2013

+

US FVC(2)

2013

+

(1) Returns are based on pre-tax average operating capital employed(2) Fuels Value Chains

79

Refining & Marketing growth and returns

Returns based on pre-tax average operating capital employed

Actual pre-tax underlying RC profit $bn

Pre-tax underlying RC profit $bn in 2009 refining environment

(1) Compound Annual Growth Rate

0

1

2

3

4

5

6

7

8

9

10

11

12

2007 2008 2009 2010 2011 2012 2013+

Pre-

tax

unde

rlyin

g R

C p

rofit

($bn

)

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Pre-tax Returns (%

)

(1)

(2)

Differential Growth

15-20% CAGR

SustainableGrowth and

AttractiveReturns

Competitive Recovery

>50% CAGR(1)

80

Refining & MarketingSummary and what to expect

• Safe and reliable operations remains #1 priority

• On track to deliver >$2bn pa of pre-tax underlying RC profit improvement by 2012

− Costs: efficiency improved, returning to 2004 levels

− Refining: achieved break-even in similar environment to 2009

• Portfolio: focus on quality and integration in advantaged locations

− Reposition US Fuels Value Chains: halve refining; focus on margin capability, integration

− Improve and grow Eastern Hemisphere Fuels Value Chains: improve margin capability; access growth

− Growth in quality International Businesses

• Sustainable long term growth and attractive returns

81


82

Alternative Energy

Goshen wind farm, Idaho, USA

• Alternative Energy is the fastest growing energy sector

• BP continues to invest: focus on biofuels and wind

Source: BP Energy Outlook 2030

Shares of world primary energy

0%

10%

20%

30%

40%

50%

1970 1990 2010 2030

Oil

Coal

Gas

Hydro

Nuclear Renewables

Sugar cane harvesting in Brazil

Goshen wind farm, Idaho, USA

83

Moving BP forward

Putting Safety & Operational Risk management at the heart of the company

Re-building trust

Value growth• Dividend resumed

− Quarterly dividend level of 7 cents/share− Intention to grow over time in line with improving circumstances of firm

• Active portfolio management: divesting/acquiring for value− Divestment proceeds of ~$13bn in 2011 to complete $30bn program− Divestment of two US refineries planned by end 2012− Acquisition of Devon assets expected to complete in 2011

• Investing for upstream value− Doubling exploration spend− 32 project start ups by 2016: 1mmboe of new production− New forms of partnerships with resource holders : Rosneft strategic alliance

• Reshaping downstream− $2bn+ pre tax performance improvement by end 2012: $0.9bn delivered in 2010− More focussed portfolio: improved returns and growth

− Repositioning US fuels value chains and halving US refining capacity

84

Byron Grote

Chief Financial Officer

Q&A

Bob Dudley

Group Chief Executive

Mike Daly

Executive Vice President, Exploration

Bernard Looney

Executive Vice President, Developments

Bob Fryar

Executive Vice President, Production

Andy Hopwood

Executive Vice President, Strategy & Integration

Iain Conn

Chief Executive Refining & Marketing

Mark Bly

Executive Vice President, Safety & Operational Risk

london 1 february 2011 - bp€¦ · −growth project portfolio + focussed base = potential for...

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